What does it mean to surrender a life insurance policy?

Surrendering a life insurance policy refers to the process of canceling the policy before its maturity or before the insured individual passes away. When an individual surrenders their policy, they are essentially terminating the contract with the insurer. This action may lead to the policyholder receiving a cash value payout if their policy has accumulated a cash value, which is typically the case with permanent life insurance policies, such as whole life or universal life.

The key aspect of surrendering is the premature cancellation, which means that the insured will not be covered for death benefits anymore, and the insurance coverage will cease. It reflects a decision based on various personal or financial considerations, which could include changing needs or circumstances.

In contrast, the other options relate to different actions concerning life insurance policies. Transferring the policy to another person involves changing ownership, while converting a policy deals with switching to another insurance type without surrendering the original contract. Receiving a cash value payout may occur upon surrendering but is not the comprehensive definition of surrendering itself; hence, it does not capture the full meaning.